Nope, just Mayonnaise

Today was futures contract roll-over day (based on volume). Some people do actually roll over today. Some don't. A person can wait a few days if they want. But the free chart services show the roll-over as of today, so it created some confusion. Not a Miracle Whip, just Mayonnaise. We did our level best to talk traders through it. So far, so good. Here is the daily chart of the ES futures with just a few of the important features of today's trading.

Today's price was essentially turned lower by the resistance of the 100-day SMA (green crosses). Prices made a lower low on the day - which keeps the swing line indicator headed lower on the daily chart, and price is below the 18-day SMA so the daily bias is still down.

Today's price movement has now undercut the second daily down (red) fractal back, marked by both the red dotted line and the red up arrow. This is a sign of eventual weakness. The other down (red) fractals back at the late December lows are also marked, but they have not been exceeded lower yet. They could be. And further, the downward price movement overlapped the highs of those initial candles in late December that initiated the up trend (shown with the red arrow pointing down below the text). 

Yesterday was an outside day down. Today had some follow-through but, as we showed in comments in the prior post, there can be more price excursion lower from this wave. Bear in mind, though, that price is currently running into the lower daily Bollinger Band. So the Smart Money may look to take some profits there as the probability of being outside of the bands is only about 5% (not impossible, just lower odds), especially since the slow stochastic is only in over-sold territory.

Price is pushing the bands lower, and EW counting does allow for lower lows. But, eventually, we would like to see the bands narrow in or constrict so that they might also signal a larger impulse downward to follow. That would be the most ideal circumstance. Novice wave counters (and even some experienced ones) often wind up rushing the wave count. Few recognize fully that there are often a significant number of overlapping one's and two's before that third wave occurs. It really helps to become familiar with the degree labels so one can see how many waves might have to be worked through.

So far, we are trying to count five sub-minuette waves from the high as i, ii, iii, iv, v. Right now, we are only at wave iii, if it forms properly. If it does, and we get a well-formed iv and v, then we will only be at minuet wave (i), and, yes, traders and counters will have to work their way upward through a minuet wave (ii) whether they like it or not. That's the biz.

Have an excellent start to the evening and the weekend.

TraderJoe